Technology is playing an increasing role in the design and delivery of HR services across today's organisations. This shift is underlined by the rising sophistication of HR professionals' understanding and application of IT, and by their growing awareness of what is possible - and what will become possible in the future - through the use of technology.
This awareness has been driven in part by the increasing use of HR shared services and HR BPO, both of which need to be underpinned by a sophisticated technology platform.
Against this background of increasing sophistication in the way they use IT, HR professionals face several key technology challenges. The most obvious is that much HR IT investment to date has failed to realise the targeted commercial and organisational benefits, with a widespread perception of the potential value being 'trapped'.
Also, a significant proportion of this investment to date has focused on large ERP systems, whose main focus is not HR but on providing a wider organisational framework.
As a result, there is a frustration amongst HR functions that ERP systems often do not include the type of tools they need to manage and plan the strategic HR elements of the business, such as organisational modelling or capability management. All these trends and challenges raise significant implications for the HR technology market in 2005 and beyond, and for the suppliers looking to sell into that market.
New investment
As we move into 2005, many IT choices in HR will be fundamentally business-led − although HR will also need to keep a close eye on the business opportunities that emerging technology will open up in future years. The clearest business-led trend will be a drive to exploit the full potential value of existing enterprise-wide HR systems by starting to use the unexploited elements and capabilities.
A related IT trend that will continue to gather pace in 2005 is continuing growth in the use of online self-service. Many organisations that have implemented self-service capabilities, which are increasingly administered by an SSC and offered via an employee portal, have yet to realise the full potential benefits or usage levels. These companies are now seeking to encourage the cultural change which will lead to mainstream adoption and use of HR self-service, in turn enhancing both efficiency and perceived service levels.
Both of these requirements will involve HR functions in identifying new technology that will enable the business to deal with strategic issues, either through ‘bolt-on’ modules or stand-alone technology. In many cases, these additional elements and modules will be used to fill gaps in areas such as competence mapping, resource modelling and learning management systems (LMS). Organisational charting capabilities will prove to be a particularly popular addition, since these can help HR track and manage an increasingly complex mix of employed, subcontracted and outsourced capabilities.
This trend towards add-on solutions reflects the fact that ERP systems often provide a sound framework for administering HR activities, but lack the content element needed for areas such as learning and development. Add-ons can provide and/or support that content, and can dovetail with the wider ERP system to enable HR to manage and deliver it in a coherent and standardised way.
Futures
New technologies are emerging that will open up opportunities which HR must at least start to examine in 2005, even though many of these capabilities will not reach the mainstream implementation phase until around 2006-2007. For example, biometrics and ID verification for HR purposes − via equipment such as fingerprint scanners − will be much talked-about in 2005. Also, the rising momentum behind online self-service will drive HR services onto a growing range of platforms, including wireless internet, PDAs, instant messaging and SMS.
As with self-service via a PC, the main barrier to adoption will not be the technology itself, but the shift in culture and mindset needed to make people want to use it.
As the HR IT landscape continues to evolve in 2005, so will the shape of the supply-side players looking to win a share of the resulting demand. While the market still includes many niche players with highly specialised offerings, these smaller companies have historically tended to suffer from the widespread perception that the major global ERP players were a safer long-term bet because they were less likely to be acquired. However, recent proposed mega-mergers have swept away this sense of security, thereby levelling the playing-field to an extent between the large and smaller providers.
That said, there can be little doubt that consolidation will continue at all levels of the HR IT industry, with many specialist software companies likely to acquired by larger application vendors and BPO providers.
As vendors’ role in service provision continues to increase, they will need to keep abreast of evolving issues such as privacy, ID verification and data ownership. This pressure in turn will help to drive selective complementary consolidation of smaller niche developers by larger players.
